Can you use super to buy a house?

While superannuation is designed to help you save money for your retirement years, by following some strict rules, you can also use super to fund your home purchase. For instance, if you’re a first home buyer, you can use the First Home Super Saver Scheme (FHSS) to withdraw some of your voluntary contributions to pay your deposit. Similarly, you can use a self-managed super fund (SMSF) to purchase an investment property, provided you don’t live in it, rent it to family, and so on. As always though, it’s important to make sure you get financial advice and consider your goals when considering this strategy. 

In this article, we’ll explore how to use super to buy a house, including providing clarity on what’s involved, the advantages and risks and whether it’s the right choice for you.

Three key ways to buy property with your super

Use the First Home Super Saver Scheme (FHSS)

If you’re a first home buyer, you can use the First Home Super Saver Scheme (FHSS) to withdraw your voluntary additional super contributions to help fund your house deposit.

How it works:

  • You make voluntary contributions to your super. This can be concessional (before tax) and non-concessional (after tax) contributions. 
  • You withdraw these additional contributions (plus any associated earnings) when you’re ready to buy.
  • The money goes toward your first home deposit. 

There are rules and caps around your contributions as well as the maximum releasable amount under the scheme. Learn more about FHSS, opens in new window.

 

Benefits

  • Concessional contributions are taxed lower, for example at 15%, instead of your marginal tax rate, making it a favourable choice for anyone looking to buy the first home with super.

  • When you withdraw these funds for the FHSS, you’ll pay tax on the amount released at your marginal rate, but with a 30% offset, making them more tax efficient. This released amount includes your concessional contributions plus any associated earnings and is included in your assessable income for that year.

  • The scheme gives you an alternate way to save. For example, you can save up to $50,000 per person (or $100,00 per couple) through your super – allowing you to boost your deposit.

Disadvantages

  • You don’t have immediate access to funds and will need to apply through the ATO, wait for approval, and only then will the money be released. This can take up to a few weeks. If you’re close to finalising a property deal and relying on those funds, the delay could feel stressful.

  • This scheme is not available to you if you already own a property.

  • In case you change your mind and don’t buy a home, you can’t take the money out for other purposes. The money stays in your super until retirement.

Learn if you’re eligible to apply for your first home under the FHSS.

Buying property through a self-managed super fund (SMSF)

If you have an SMSF, you can use this fund to help you buy an investment property.

How it works:

  • You set up an SMSF, which allows you to control your super investments.
  • You purchase property for investment purposes.
  • Rental income from the property goes back into the SMSF.

Remember that setting up an SMSF is a highly regulated process, and it can be a wise decision to seek professional advice prior to understand your responsibilities when setting up the fund.

Benefits

  • There are tax benefits for rental income. For example, rent received by your SMSF will be taxed at 15%.

  • If you sell the property (while you’re still working or in the accumulation phase), your capital gains tax (CGT) liability will be reduced to 10% if the property is held for over 12 months.

  • You’re able to diversify your investments by adding property to your super portfolio. This has the potential to provide long-term growth and rental income.

  • As repayments are made from your SMSF, the rental income is likely to help offset loan repayments and other fees.

Disadvantages

  • You can’t buy a home to live in with an SMSF.

  • There’s a lot of complexity and regulation with SMSFs and you’ll need to comply with the superannuation laws, ATO guidelines and strict reporting obligations. There are severe penalties for breaches.

  • There are a variety of costs associated with starting and managing an SMSF each year.

Learn more about self-managed super funds, opens in new window.

Buying a home once you’ve reached preservation age

Once you’ve reached preservation age (either 60 if you’re retired or 65 if you’re still working) – you can access your super to buy a home. This means you can take out all the money in your super to fund your house purchase. Be sure to talk to a registered financial planner to understand if there are any tax implications with withdrawals. 

How it works:

  • At preservation age, you access your super and have the choice to either withdraw money via a lump sum or through an income stream, depending on whether you’ve retired. 
  • If you’re eligible, you can withdraw funds and use them to buy a home.

Benefits

  • You have full control over your funds. Once you legally access your super, you can use it however you want, including purchasing your home.

  • Unlike an SMSF purchase, if you purchase a property for investment purposes, you can live in the property if you choose. There are no rules preventing you from occupying the property.

  • Using super to buy a debt-free home can help reduce your living expenses and provide financial stability in retirement.

Disadvantages

  • Withdrawing a lump sum from your super may impact your future earning potential as this drastically reduces long-term retirement savings.

  • If you need your super to fund a deposit, keep in mind that it can be challenging to get a home loan once you’ve retired, and you may be at greater risk of mortgage stress.

  • If you withdraw and use your super for a home, it may affect your eligibility for the age pension depending on asset and income tests.

How to choose

Here’s a quick summary to help you compare options when considering super as part of your home purchase.

Using super for your home purchase
  Ideal for Restrictions
First Home Super Saver Scheme
Ideal for
First home buyers looking to save tax efficiently
Restrictions
Must use funds for a first home
SMSF investment property
Ideal for
Investors using super to buy property
Restrictions
Can’t live in the property or rent to family
Buying at preservation age
Ideal for
Retirees waiting to buy home with super
Restrictions
Must meet age and access conditions.

Each option serves a different financial purpose, so it’s important to choose based on your individual goals and eligibility. Your super is there to support your financial wellbeing later in life, and it’s important to consider your future financial position as well as your current goals when deciding whether to use super to purchase a home. Always consider speaking with a financial advisor to help you make the right decision. If you’re looking to get support with securing a mortgage, it’s worth touching base with our home loan experts to get clarity on the next steps.

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Terms and Conditions

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.

Target Market Determinations for these products are available at nab.com.au/TMD.